Sumitomo Realty & Development (TSE:8830) Will Pay A Larger Dividend Than Last Year At ¥35.00

Sumitomo Realty & Development Co., Ltd.'s (TSE:8830) dividend will be increasing from last year's payment of the same period to ¥35.00 on 4th of December. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

View our latest analysis for Sumitomo Realty & Development

Sumitomo Realty & Development's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Sumitomo Realty & Development was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Looking forward, earnings per share is forecast to rise by 2.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

Sumitomo Realty & Development Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥70.00. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Sumitomo Realty & Development Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Sumitomo Realty & Development has impressed us by growing EPS at 7.1% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Sumitomo Realty & Development's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Sumitomo Realty & Development's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Sumitomo Realty & Development has been making. We don't think Sumitomo Realty & Development is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Sumitomo Realty & Development that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.